Extreme Poverty Reduction: An MDGs Success Story?

17/10/2013 12:40 BST
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Updated
23/01/2014 23:58 GMT

The goal of extreme poverty reduction is surely the best-known of the UN's eight Millennium Development Goals (MDGs). On the face of it, target 1a - to halve, from 1990 levels, the proportion of people living on less than $1.25 a day by 2015 - is seen as a success story of the MDGs project, having been achieved five years ahead of schedule. But with two years to go until the goals expire and amid a growing global debate on what should replace them, this target warrants closer scrutiny.

What is extreme poverty?

When we speak of those living in 'extreme poverty' we mean the world's poorest people; those who are unable to meet the most basic of human needs, such as having a safe place to live and enough food to eat, and unable to cope with external shocks such as volatile food prices or natural disasters. Since 2000 these people have been the primary focus of the MDGs, however, counting their number is not as straightforward as it might seem.

Scant data for a number of countries hinders any truly comprehensive assessment, and without a clear picture of where we're starting from, deciding how to improve that picture is all the more difficult. Currently the World Bank has insufficient information to report on poverty reduction progress, or lack thereof, for 36 countries. Improvements to the timely and accurate collection of household surveys and other available data are badly needed.

There is also debate over the best method for measuring extreme poverty. The MDGs use the widely-recognised international poverty line of $1.25 a day (at 2005 purchasing power parity). However, critics of this absolute poverty line argue that its narrow focus diverts attention away from those who find themselves at or slightly above the $1.25 line. These people still suffer acute deprivation and require assistance if they are not to fall back into 'official' extreme poverty.

There are a raft of alternative poverty measurement options, including:

• using the higher $2 a day measure as a global baseline

• setting both a 'low' and a 'high' poverty line, in a bid to capture the varying levels of poverty

• using national poverty lines as well as an international poverty line

• utilising complementary poverty indicators and statistics

The final point has been particularly influential in shaping poverty reduction thinking, with calls for the debate to move on from a discussion simply about income. As the MDGs themselves implicitly recognise, poverty is multidimensional and borne out of a number of inter-related, complex factors. Therefore any analysis of extreme poverty should also include an assessment of these additional factors; such as unemployment rates or access to and quality of public services.

How have we done so far?

Progress over the last 20 years has been dramatic. In 1990, 47 per cent (1.9 billion) of the total population of developing countries lived on under $1.25 a day. The world celebrated in 2010 when, five years ahead of the MDGs deadline, the target to halve this percentage had been met and stood at 22 per cent (1.2 billion).[1] However, as with other MDGs, progress has been uneven. Despite gains in most regions of the world, the proportion of sub-Saharan Africa's population living on under $1.25 a day remains at just under 50 per cent.[2] And out of the overall global reduction, China and India alone accounted for 75 per cent.[3]

Progress within countries has also been patchy.[4] Experience from the MDGs has shown that tackling inequality has proven a powerful force in reducing poverty. According to research, extreme poverty in a country with 2 per cent annual growth and income distribution close to the world's most equitable countries, could be halved in 10.5 years. Under the same conditions but in a country matching the most unequal, it would take 57 years.5 Efforts to reduce poverty can ring hollow if they only benefit a particular section of society and ignore vulnerable marginalised groups.

Undoubtedly the MDGs have proven an incredibly useful tool for applying pressure on governments and holding them accountable for any lack of progress on the goals. The MDGs have also had an impact on aid levels, with an overall increase in overseas development assistance in recent decades, particularly to the poorest states (though few donor countries have met the target of spending 0.7 per cent of gross national income on aid).

Pulling 700 million out of extreme poverty is a major achievement. But the target was, by design, only partially addressing the problem. There remain today over a billion people living on under $1.25 a day.[5] The World Bank estimates that by 2015 this will reduce slightly to 970 million, or 15.5 per cent of the developing world population.[6] The next step, reaching the remaining billion, will prove an even greater challenge.

Uncertain outlook

In contrast to 20 years ago, the majority of the world's poorest can now be found in middle-income countries; referred to as 'the new bottom billion' by economist Andy Sumner. The political case for sending aid to these countries can be harder to make. In 2012 the UK announced it was ending its aid programme in India, despite being home to 456 million people living in extreme poverty - the largest number to be found in any country.[7] There is also concern over how to reach the vulnerable populations of fragile states, where progress on all MDG targets has been lagging and social safety nets are either non-existent or inadequate.

Compounding these factors, the recent global economic slow-down means that vital economic growth is declining or slowing down, including in China and India, whose remarkable reductions in extreme poverty were almost wholly due to an extraordinary period of sustained growth. This will remain crucial to any future gains. An additional consequence of the slow-down has already been felt in aid levels. Although these have been on the increase, in real terms overseas development assistance has dropped for the last two years in a row.[8]

Despite this, the eradication of extreme poverty remains firmly on the global agenda. In April this year World Bank Group President Jim Yong Kim announced that the organisation would be aiming to reduce extreme poverty to no more than three per cent by 2030. Not to be outdone, the Secretary-General's High-Level Panel on the Post-2015 Development Agenda released its report in June, which presented 12 possible new development goals, with at its heart the ambition to eradicate extreme poverty entirely by 2030.

The debate is now on as to how and even if extreme poverty can be completely eradicated. Both the World Bank and the High-Level Panel make the important connection between raising incomes and improving public services, reducing inequality (though a standalone goal was notably absent from the High-Level Panel report) and strengthening resilience to external shocks. The High-Level Panel also recommends using an absolute international standard alongside national poverty lines, and requires that a target only be deemed to have been met if progress has been made by all social groups.

The outlook for 2030 is uncertain. Current poverty level predictions vary greatly depending on the forecast methods used. The international community now has two years until the 2015 MDGs deadline to decide how it will go about meeting the immense challenge it has set for itself.